Nigeria’s Dangote Petroleum Refinery IPO is exposing the difficulties African investors face when trying to invest across national borders, prompting the Nigerian Exchange Group and financial-market partners to explore ways of improving access to investment opportunities across the continent.
The Nigerian Exchange Group (NGX Group) said on 16 October that it had held discussions with financial institutions and securities exchanges in Egypt and Ethiopia on improving cross-border investment, using the refinery’s share offer as a practical example of how African markets could work more closely together.
The discussions took place in Cairo on 15 October, with the Egyptian Exchange and African Export-Import Bank involved in the Egyptian engagement, and in Addis Ababa with the Ethiopian Securities Exchange. The meetings followed earlier engagements with the Nairobi Securities Exchange and the Botswana Stock Exchange, according to NGX Group.
The initiative comes after Reuters reported on 9 October that the refinery’s $1.6bn share offer had exposed significant obstacles to cross-border investment. Although the IPO was presented as an opportunity for investors across Africa to own a stake in one of the continent’s largest industrial projects, its prospectus showed that the public offering was registered in Nigeria rather than across multiple African markets.
This meant that prospective investors in other countries faced additional regulatory requirements and limited access to authorised investment channels. Reuters reported that Nigerian investors could access the offer through 53 channels, including banks, brokerages and trading applications, while the prospectus listed Ecobank and SBG Securities as channels for African investors outside Nigeria.
The difficulties reflect a wider problem in African capital markets, where national regulations, investor verification requirements, settlement arrangements and currency conversion procedures can make it difficult to invest across borders. Even when investors are interested in a business operating elsewhere on the continent, they may not have straightforward access to its shares.
Dangote Refinery has since taken steps to broaden participation. In a notice published on 12 October, the company said the Securities and Exchange Commission had approved an extension of the offer period from 13 October to 27 October. The company said the additional time would support efforts to expand distribution channels and introduce depositary receipt programmes to facilitate participation by eligible investors in other African markets.
Depositary receipts can help investors gain exposure to a company through arrangements available in their local market, potentially reducing some of the practical difficulties associated with purchasing shares directly in another country. However, such arrangements still require appropriate regulatory approvals, financial intermediaries and systems for handling settlement, custody and currency conversion.
For African businesses seeking capital, the issue extends beyond one refinery. Better-connected capital markets could give companies access to a wider pool of investors and help channel African savings into industrial expansion, infrastructure and other productive investments. For investors, improved access could create more opportunities to diversify their portfolios across African economies.
The Dangote offer therefore presents a test of whether African exchanges, regulators and financial institutions can turn interest in regional investment into practical access. With the application period scheduled to close on 27 October, the progress of the cross-border initiatives will be an important development to watch.
